WTO rules Boeing got illegal subsidies

The Boeing 787 Dreamliner sits outside the Boeing assembly plant in Everett, Washington. The EU said Boeing would not have been able to launch the Dreamliner without US government support. - File

A World Trade Organization (WHO) appeals panel upheld Monday an earlier finding that US planemaker Boeing Inc received at least US$5 billion in subsidies that hurt its European arch-rival and were prohibited under international trade rules, but it was far less than the European Union had alleged in its complaint.

The amount is also less than the US$18 billion in illegal state support over four decades that the US has alleged that rival Airbus, based in Toulouse, France, received during the same period.

A WTO appeals panel ruled in a parallel case in May on a complaint brought by the US that Airbus also received state subsidies from the EU that hurt Boeing, but not all of them were illegal.

As usual, Brussels and Washington each claimed a measure of victory in their seven-year-old tit-for-tat dispute over financial aid to their respective airplane manufacturers.

The two companies have been locked in a long-running trans-atlantic trade dispute over a market believed to be worth more than US$3 trillion over the next decade.

Monday's ruling means the WTO has now dealt with appeals in each other's cases and found that both governments are at fault in doling out billions of dollars of support to their respective aircraft-making industries, in violation of international trade rules.

The European Union had alleged that Boeing had been given US$19.1 in illegal federal and state subsidies between 1989 and 2006, including US$10.4 billion from the NASA space programme's research and development. While the WTO appeals panel did say on Monday that Boeing received illegal aid, the sums were far smaller than the EU alleged.

"The appellate body has now spoken in both the Airbus and Boeing cases," said Rainer Ohler, Airbus' spokesman. "Comparing the core claims made by both sides, the net outcome is clear: Boeing's cash grants are fundamentally illegal, while the system of loans to Airbus by European governments is legal and may continue. Boeing and the US now will have six months to implement the WTO decision."

Boeing, however, said in a statement that the WTO ruling "slashed earlier findings of harm to Airbus from US subsidies. The decision confirms that in terms of amount, effect and nature, US government support to Boeing is minimal in comparison to the massive European subsidies provided Airbus."

Now that the ruling is in, Boeing and Airbus are each required to prove they are complying with WTO rules.

Boeing emphasised that the US government has already removed some US$2 billion in prohibited subsidies, leaving about US$3 billion still to be addressed.

Welcomed confirmation

The European Commission, whose complaint to the WTO was the subject of the ruling, said it welcomed the confirmation that Chicago-based Boeing also received billions of dollars in illegal subsidies.

EU Trade Commissioner Karel De Gucht called Monday's ruling vindication of the "EU's long-held claims that Boeing has received massive US government handouts in the past and continues to do so today."

De Gucht said Airbus has lost US$45 billion in sales due to illegal Boeing subsidies, and Boeing would not have been able to launch its 787 'Dreamliner' without government support.

He added the ruling confirms that Boeing was due to get US$3 billion to US$4 billion in illegal aid due to tax measures from Washington state, where it was formerly based.

But his counterpart, US Trade Representative Ron Kirk, called the ruling "a tremendous victory for American manufacturers and workers".

He also said that the US already complied with part of the ruling by eliminating measures that made possible US$2 billion of the more than US$5 billion of prohibited subsidies.

Kirk said US subsidies to Boeing have cost Airbus 118 lost aircraft sales, while EU subsidies for Airbus have cost Boeing 342 lost aircraft sales.

"It is now clear that European subsidies to Airbus are far larger — by multiples — and far more distortive than anything that the United States does for Boeing," he said.